GVC offloads Turkey operations, seen as clearing way for bookie deal

GVC Holdings announced the sale of wholly-owned Turkish-focused subsidiary Headlong to Ropso Malta on Thursday, which sparked off rumours that the online gaming group was looking to launch a major takeover deal.

The FTSE 250 firm said the disposal carried performance-related earn-out consideration of up to a maximum €150m in cash, receivable on a monthly basis over a five-year period.

Selling this business was seen as removing a potential obstacle to a takeover of Ladbrokes Coral as the Turkish business proved a sticking point in GVC's effort to buy the bookmaker earlier this year.

Completion was conditional on gaming regulatory and lender approval, and was expected take place by the end of December.

Following completion, transitional services arrangements have been agreed for an initial limited period of no more than six months, GVC’s board confirmed.

In the year to 31 December 2016, Headlong generated approximately €35m of clean EBITDA; with management expecting a similar group clean EBITDA contribution from the respective operations for the financial year to 31 December 2017.

GVC said it sold Headlong in order to further increase its focus on regulated markets, with the disposal meaning the regulated and locally taxed proportion of the group's net gaming revenue would increase to roughly 75%.

The sale proceeds would be used for general corporate purposes, with the board confirming the disposal would not impact its stated progressive dividend policy.

In addition, it said it believes that the disposal will "increase the attractiveness of the group to investors and potential consolidation partners".

GVC added that the strong start to the quarter - as it reported in its trading update on 12 October - had continued, with daily net gaming revenue in October ahead 26% over the same period in 2016 - or 29% in constant exchange rates.

That was reportedly boosted by an “exceptionally high” sports gross win margin of 13%, and a positive response to new marketing campaigns.

“As the group evolves, our focus is increasingly on regulated markets and markets where we believe there is a realistic path to regulation,” said GVC chief executive Kenneth Alexander.

“Today's disposal is consistent with this strategy and enhances GVC's position as a leading operator in a rapidly developing industry.”

GVC's mention of consolidation partners was a catalyst for more City rumours, with both Ladbrokes and William Hill having been linked to the firm in recent months.